Employment and Unemployment
• Unemployment could be defined in physical
(UP) as well as in economic (UE = U) terms.
• UP = Population – Employed people
• U = Work force – Employed people
Work force = Population - People not in
• There is another concept called work
participation rate, which equals the workforce
as a proportion of the population.
• u = U / Workforce
• Thus it is the proportion of the unemployed
persons in the total work force.
Kinds of Unemployment
• Voluntary and Involuntary
• Open and Hidden
• Voluntary unemployment means willful
unemployment. It may arise due to laziness,
obsession with wealth and with leisure. Since
this is voluntary, it poses no serious economic
• Involuntary unemployment means forced
unemployment. To be precise, a person who is
willing and able to work, and is looking for a
job but does not find one, is involuntary
• Involuntary unemployment is caused by the
paucity of employment opportunities and
hence it is an economic issue.
Open unemployment is
Hidden unemployment is
• Frictional or turnover unemployment arises in
between two jobs, the job which a person has
quit in order to find the second job.
• Cyclical unemployment is caused by business
cycles and economic fluctuations. During
droughts and floods, farmers may be
unemployed, and during strikes or lockouts,
industrialists and workers may remain
• Structural unemployment is caused by the
mismatch of vacancies and skills of
• Disguised unemployment could arise when
several people share a particular work at a given
time and /or when such work is spread over time.
• Some occupations are seasonal. For Eg; Farmers
are occupied a lot during the Kharif (june –
october) and Rabi (dec – march) seasons and
have a little work during the off times. Unless,
these farmers diversify and take up some other
activities during the off seasons they would be
• Underemployment is the situation where the
work available is for lesser than the full
employment hours or for periods lesser than
the full working days in a given period (year/
month/week). Eg: Part time workers in
industries and services.
Causes of unemployment
Social and cultural factors
Inefficient industrial and agricultural sector
Measurement of Employment and
• Information on the employment situation for
the economy as a whole is obtained in India
from surveys conducted by the National
Sample Survey Organization(NSSO). Some of
the measures are :
• Usual Principal Status(UPS) : A person is considered
to be in the labour force if he/she had been
working or looking for work for atleast six months
during the preceding 365 days. Those working for
majority of the days in labour force are treated as
employed and the rest as unemployed.
• Usual Principal and Subsidiary Status(UPSS) : Even
those unemployed or out of labourforce as per UPS
definition but had worked for atleast 30 days are
treated as subsidiary status workers and hence
included under labourforce.
• Current Weekly Status(CWS) : A person is
considered as employed if he/she had been
working for atleast one hour on any day
during the 7 days preceding the survey
(reference week). A person not working even
for one hour is treated as unemployed.
• Current Daily Status(CDS) : This is based on
employment intensity during 14 half days of
the reference week. For this estimation, every
half day’s activity status will be counted over
the whole week.
• For measurement of rate of unemployed
person days, the total count of unemployed
days in the reference week is divided by the
total number of workforce days during the
• Full employment is an ambiguous concept and
accordingly it has no unique definition. It
means zero unemployment. Usually when
unemployment rate is close to say, 3-4 percent
economists call it a full employment situation.
• A situation where demand for labour equals
the supply of labour in the economy at a given
wage rate. Or where number of people
employed equals the number of vacancies.
Unemployment rate in India
• Unemployment Rate in India decreased to 3.80
percent in 2011 from 9.40 percent in 2010.
Unemployment Rate in India is reported by the
India Ministry of Labour. Historically, from 1983
until 2011, India Unemployment Rate averaged
7.6 Percent reaching an all time high of 9.4
Percent in December of 2009 and a record low of
3.8 Percent in December of 2011. In India, the
unemployment rate measures the number of
people actively looking for a job as a percentage
of the labour force.